854965 Ontario Ltd. operating as A & E Radiator v. The Dominion of Canada General Insurance Company

[Indexed as: 854965 Ontario Ltd. v. Dominion of Canada General Insurance Co.]

68 O.R. (3d) 30

[2003] O.J. No. 4471

Court File No. 1380

Ontario Superior Court of Justice Divisional Court Cunningham A.C.J., Ferrier and Pierce JJ.

November 13, 2003

Insurance -- Fire insurance -- Interpretation and construction -- Insured retaining public adjuster on contingency fee basis to assist it in preparing its insurance claim -- Adjuster's fees constituting loss as defined in statutory condition 11 -- Adjuster's fees should be referred to appraisal under s. 128 of Insurance Act -- Insurance Act, R.S.O. 1990, c. I.8, ss. 128, 148, stat. con. 11.

To assist in preparing its insurance claim after a fire occurred on its premises, the insured retained a public adjuster on a contingency fee basis. The insured brought an application pursuant to s. 128 of the Insurance Act claiming that the adjuster's fees were Professional Fees and, therefore, a loss as defined in statutory [page31 ]condition 11, referable to appraisal. The application judge agreed with the insured. The insurer appealed.

Held, the appeal should be dismissed.

The application judge correctly determined that the "enhancer" endorsement in statutory condition 11, in referring to "other consultants", includes a licensed adjuster. Statutory condition 11 requires that the procedure stipulated by s. 128 of the Act shall be followed in order to determine by appraisal the value of the property insured, the property saved or the amount of the loss. There was no reason to restrict "amount of the loss" to property. Economic losses were clearly covered by the policy. Where the subject matter of the insurance is "rents, charges or loss of profits", the appraisal procedure called for by s. 128 of the Act does not apply. The fees at issue in this case were not "charges" in the context of that phrase.

APPEAL from an order of Kennedy J. (2003), 2003 42670 (ON SC), 64 O.R. (3d) 234 (S.C.J.) that an adjuster's fees were referrable to an appraisal.

Cases referred to Cosyns v. Canada (Attorney General) (1992), 1992 8529 (ON SCDC), 7 O.R. (3d) 641, 88 D.L.R. (4th) 507 (Div. Ct.); July v. Neal (1986), 1986 149 (ON CA), 57 O.R. (2d) 129, 17 O.A.C. 390, 32 D.L.R. (4th) 463, [1986] I.L.R. Â1-2126, 12 C.P.C. (2d) 303, 44 M.V.R. 1 (C.A.), revg (1985), 1985 6489 (ON SC), 3 C.P.C. (2d) 233 (Ont. Dist. Ct.); McNaughton Automotive Ltd. v. Co-operators General Insurance Co. (2001), 2001 21203 (ON CA), 54 O.R. (3d) 704, 200 D.L.R. (4th) 449, [2001] I.L.R. ÂI-3997, 15 M.V.R. (4th) 179, 10 C.P.C. (5th) 1 (C.A.), revg (2000), 2000 22409 (ON SC), 50 O.R. (3d) 300, 6 M.V.R. (4th) 297 (S.C.J.); Somersall v. Friedman, [2002] 3 S.C.R. 109, 215 D.L.R. (4th) 577, 292 N.R. 1, [2002] I.L.R. ÂI- 4114, 2002 SCC 59, 25 M.V.R. (4th) 1, [2002] S.J. No. 60 (QL); Stein v. "Kathy K" (The) (1975), 1975 146 (SCC), [1976] 2 S.C.R. 802, 62 D.L.R. (3d) 1, 6 N.R. 359 Statutes referred to Insurance Act, R.S.O. 1990, c. I.8, ss. 128, 148, stat. cons. 6(1)(b)(v), 11

John W. Makins, for respondent (appellant). C. Brandow, for applicant (respondent).

[1] Endorsement BY THE COURT: -- A fire occurred on the premises of A & E Radiator ("A & E") on or about October 21, 2001. To assist in preparing its insurance claim, A & E retained National Fire Adjustment Co. Inc. ("NFA"), a public adjuster on a contingency fee basis, whereby A & E agreed to pay a contingency fee to NFA based on 8 per cent of all insurance proceeds and any other monetary recovery subject to a cap of $20,000.

[2] A & E brought an application, pursuant to s. 128 of the Insurance Act, R.S.O. 1990, c. I.8, claiming that the NFA's fees were Professional Fees and, therefore, a loss as defined in statutory condition 11, referable to appraisal.

[3] The central issue in this matter is whether statutory condition 11, and thereby the procedure set out in s. 128 of the Act, applies to the Professional Fees. [page32 ]

[4] The application was determined, by Kennedy J. who found that NFA's fees were a loss and that statutory condition 11 contemplated such a loss. He accordingly found that the appraisal process set out in s. 128 of the Insurance Act was applicable.

[5] The respondent insurer, Dominion of Canada General Insurance Company, appealed to this court, asking that the decision of Kennedy J. be reversed, that the application be dismissed and that costs follow the event here and below.

[6] For the reasons following, we are of the view that this appeal should be dismissed.

[7] The standard of review for appeals from the order of a judge is widely accepted to be whether or not the decision of the judge was "clearly wrong". This standard applies to both finding of fact and to the application of legal principles. The judge must have acted on a wrong principle or disregarded or misinterpreted material evidence. See: Stein v. "Kathy K" (The) (1975), 1975 146 (SCC), [1976] 2 S.C.R. 802, 62 D.L.R. (3d) 1, and Cosyns v. Canada (Attorney General) (1992), 1992 8529 (ON SCDC), 7 O.R. (3d) 641, 88 D.L.R. (4th) 507 (Div. Ct.).

[8] We are unable to find that the decision of Kennedy J. was clearly wrong.

[9] It is to be noted that the issue at bar does not concern the liability of the insurer for payment of the adjuster's fees. Rather the issue concerns solely whether the determination of the value of such reasonable fees is to proceed through the appraisal process as required by s. 128 of the Insurance Act.

[10] In our view the learned applications judge correctly determined that the enhancer endorsement, in referring to "other consultants" would include a licensed adjuster. The "enhancer" endorsement clause 11, provides that"this policy is extended to ensure reasonable fees . . . for auditors, accountants, lawyers, architects, engineers or other consultants, for producing and certifying particulars or details of the insured's loss or losses."

[11] Statutory condition 11 requires that the procedure stipulated by s. 128 of the Act shall be followed in order to determine by appraisal the value of the property insured, the property saved or the amount of the loss.

[12] The insurer argues that, considering the ejusdem generis rule, the scope of the words "amount of loss" in statutory condition 11 should be narrowed to reflect the specific terms that precede it: "value of property insured" and "property saved". The phrase "amount of loss", it is argued, is appropriately interpreted to refer to property.

[13] Nevertheless, economic losses are clearly covered by the policy. See the first three pages of the policy under the heading [page33 ]"Summary of Coverages". Other economic losses are included in the enhancer endorsement. In addition, as noted above, s. 11 of the enhancer endorsement opens with the words"this policy is extended."

[14] The appellant argues that if there is a conflict between a statutory condition and a non-statutory condition, the provision in the statutory condition prevails, citing McNaughton Automotive Ltd. v. Co-Operators General Insurance Co. (2001), 2001 21203 (ON CA), 54 O.R. (3d) 704, 200 D.L.R. (4th) 449 (C.A.). That would be so were the words of statutory condition 11 clear. The appellant urges upon us the "ordinary meaning rule" of statutory interpretation, set out in its factum at para. 20.

[15] Applying that rule, we are unable to say that the learned applications judge erred in his interpretation of statutory condition 11 in considering the words"the amount of the loss".

[16] The appellant urges that the umpire in this circumstance will be required to determine questions of law or mixed questions of fact and law. We disagree. The umpire will only have to determine the reasonableness of the fees and assign a value to them. The action which has been commenced in the court will continue if necessary to determine any questions of law concerning the entitlement to recover these particular fees under the policy.

[17] Where the subject matter of the insurance is "rents, charges or loss of profits", the appraisal procedure called for by s. 128 of the Act does not apply. The appellant argues that the fees at issue are "charges" and therefore the appraisal procedure does not apply. We disagree. In the context of the phrase, it would appear that charges relate to charges upon the property, as referred to, for example, in statutory condition 6(1)(b)(v). Be that as it may, to interpret the word "charges" to include"the price of a thing or service sold or supplied" as urged upon us by the appellant, would be to encompass charges for the repairs to a property damaged by fire -- which can hardly be the intended scope of the word "charges".

[18] The word "loss" in statutory [condition] 11 reasonably bears alternative meanings. The enhancer endorsement, which is part of the policy, includes provisions dealing with various types of loss which are not loss of or damage to property. See ss. 1, 14 and 17 of the enhancer endorsement.

[19] Finally, although it appears that the learned applications judge erred in referring to the contra proferentem rule (see McNaughton, para. 26), the error does not affect the result.

[20] Ambiguities are to be resolved in favour of the insured: ". . . if there is doubt in the legislation establishing and governing the cover, and there are two possible interpretations of any [page34 ]aspect of the cover, the one more favourable to the insured should govern . . ." per McKinnon A.C.J.O. in July v. Neal (1986), 1986 149 (ON CA), 57 O.R. (2d) 129, 32 D.L.R. (4th) 463 (C.A.), referred to by Sharpe J.A. in McNaughton, at para. 26.

[21] Consistent with this statement is the decision of Somersall v. Friedman, [2002] 3 S.C.R. 109, 2002 SCC 59, paras. 47 and 48.

[22] Accordingly, the appeal is dismissed. Costs fixed at $4,500 including disbursements and GST.

Appeal dismissed.